tv PBS News Hour PBS August 17, 2010 10:00pm-11:00pm PDT
captioning sponsored by macneil/lehrer productions >> lehrer: good evening. a jury found former illinois governor rod blagojevich guilty of lying to federal agents today. we get the latest from newshour political regular david chalian. >> ifill: and i'm gwen ifill. on the newshour tonight, we get the latest on the attack from margaret warner in baghdad. >> lehrer: then, judy woodruff examines president obama's role this week as the democrats' campaigner-in-chief. >> if you want to make your car go forward, what do you do? you put it in d. if you want to go backwards, what do you do? you put it in r.
that's not an accident. >> ifill: we look at the administration's call for fundamental changes at mortgage giants fannie mae and freddie mac. >> lehrer: and a second mortgage story-- an encore paul solman report on homeowners who've stopped paying off their loans. >> ifill: plus, jeffrey brown talks to rosanne cash-- singer, songwriter, and daughter of country music legend johnny cash. >> any young person who is going into the same field... whose parents have been very successful, it's complicated. it was complicated for me. >> lehrer: that's all ahead on tonight's newshour.
>> lehrer: former illinois governor rod blagojevich was convicted today on a single count of lying to federal agents. for the details, we turn to newshour political editor david chalian. of course, that's one out of 24, right? >> that's right. jim, the other 23 counts a prize trial was declared by the judge today. the jury could not reach unanimity on any of the other counts, fraud, racketeering, extortion, conspiracy. the lying to federal agents in this case, the f.b.i. is the only conviction they got here with a unanimous verdict from the jury and could send rod blagojevich to prison up to five years. >> lehrer: now the one... but he told the federal agents, what did it say? what was it that he said that the f.b.i. or that the jury found that he lied about? >> it was about having knowledge of fund-raising practices. it was a very small charge when you look at the other counts that they brought. when this indictment was revealed back in april, you
remember all the talk was about the selling of a senate seat. president obama's senate seat. possibly withholding grant money for an elementary school unless rahm emanuel's brother would hold a fund-raiser for them. there were all of these charges. aate low of the f.b.i. which is clearly a federal crime, nobody thought that is where this case was going to end up. until recent weeks, until about a week ago we started seeing notes from the jury to the judge expressing that they were having trouble reaching a unanimous verdict on some count. that's when we first got the inkling that this may end up with some sort of mistrial, at least a big component of it. >> lehrer: of course they deliberated for 14 days to come up with this. now of course the thing is not over because the prosecution says, hey, we're not through yet. >> not only not through but they're going to try to retry blagojevich as soon as possible. remember, this is the u.s. attorney's office in chicago, as soon as the judge declared a mistrial he said as soon as possible we are going to bring
this back to trial. >> lehrer: the judge is going to hold a hearing on this on august 26 which is just about a week from now. so they're going to get on with it. >> they are going to get on it probably to the dismay of democrats certainly in illinois and naturally as the ... nationally as the campaign season heats up. this is unwelcome news that this will remain in the spotlight. >> lehrer: david, thank you very much. >> thank you. here's hari sreenivasan in our newsroom. >> sreenivasan: three more u.s. troops have been killed in afghanistan. that makes 15 american deaths this month, compared with 65 for all of july. the latest violence came as president hamid karzai ordered all private security firms in afghanistan to shut down in four months. the decree applies to all guards except those working inside compounds used by embassies and international organizations.
desperation grew today among millions of flood victims in pakistan. relief trucks were mobbed, and officials warned of coming famine. we have a report narrated by richard pallot of independent television news. >> reporter: it's taken nearly a forth night to rescue these victims. and they are the fortunate ones. many of pakistan remains cut off. the help hasn't come. the money is late. the water s are rising again. take a look at the river indus as it flows through pakistan. these satellite images show how it has expanded over the course of just four days. imagine what another month's monsoon might do. the effect... affected areas stretch the length of the country. pregnant women are forced to shelter in a school. but there were no delivery facilities or doctors here. the young play and stack their water, in all 5.5 billion children are at serious risk from disease animal nutrition.
>> now providing water to almost 1.5 million people every day. in most emergencies, i would be very, very happy. i would be thrilled and i would be screaming what a great job we've done. here that's a fraction of the need. >> reporter: in other tough-to- reach areas islamic charities are the only option. here, a little aid has gotten through, but most have received nothing. it's a story that echos for so many of the 20 million affected. as the relief effort intensifies, how the reconstructi is paid for is already the subject of debate. desperation is now turning to violence. in the city, there were riots at a so-called relief camp. the world may finally be waking up to their plight, but the pakistani need grows greater every day. as do their...
>> sreenivasan: pakistani president asif ali zardari acknowledged major failures today in the government's disaster response. but he said: "we have to move forward despite whatever criticism we get." it turns out the c.i.a. still has three interrogation tapes of a 9/11 plotter. the associated press reported today the tapes of ramzi binalshibh were found under a desk at the agency in 2007. they include interrogations at a secret prison in morocco. the c.i.a. has refused to let the tapes be viewed. it says it destroyed all interrogation videos of two other al-qaeda operatives. wall street regrouped today after factory output jumped in july, and several mpans reported better earnings than expected. the dow jones industrial average gained nearly 104 points to close below 10,406. the nasdaq rose 27 points to close at 2,209. general motors has recalled 240,000 suvs in north america. g.m. warned today the buckle on the rear seatbelts can be damaged when the seat backs are moved. the recall covers the chevrolet traverse, buick enclave, g.m.c. acadia, and saturn
outlook from the model years 2009 and 2010. most were sold in the u.s. and mazda recalled 215,000 mazda 3 and mazda 5 vehicles from 2007 through 2009 for power-steering problems. the man who delivered one of baseball's best-known moments, bobby thomson, has died. he passed away at home last night in savannah, georgia. in 1951, thomson hit the ninth inning home run that won the national league pennant for the new york giants over the brooklyn dodgers. it came to be known as the "shot heard 'round the world." in later years, it emerged the giants had been stealing signs between the pitcher and catcher that year, but thomson denied he was tipped to the famous pitch. bobby thomson was 86 years old. those are some of the day's major stories. now, back to gwen. >> ifill: a man blew himself up in a crowd of 1,000 iraqi army recruits today in baghdad's worst attack in months. reports of the dead ranged from 57 to 61, or even higher, with at least 120 wounded.
a pile of sandals from men blown out of their shoes lay outside the recruiting office hours after the bomber struck. the suicide attacker had waited patiently overnight with men on the street before exploding his vest as they prepared to enter the recruiting station. hundreds had gathered to hand in applications for iraq's army, one of the few good jobs available in a country wracked with deep unemployment. shopkeeper saad hassun bayati witnessed the attack. >> ( translated ): the bomber was sitting with them. when the numbers grew, it enabled him to explode himself and hurt the poor and innocent. some of them are head of households. i know a guy who sold his wife's earrings to come up and enlist. >> ifill: the bomb tore through the crowd, the dead littering the street outside the office. a pock-marked steel pole in the square bore the markings of the ball-bearings that packed the vest, magnifying its destructive power. medical city hospital in baghdad
was overflowing with the injured and the dead. >> ( translated ): what crime have those people committed? it is the government's mistake, which is unable to protect such people. >> ifill: those grave doubts are even more profound this month-- all but 50,000 americans will leave the country by september 1. >> good-bye, iraq! >> ifill: and the remaining force will focus on training, not fighting. with the u.s. role winding down, insurgents have staged a string of recent strikes throughout iraq, including a second bombing this evening in baghdad that but the departing american ambassador, chris hill, said today in washington that the attacks have failed to achieve their goal. >> i think iraq is increasingly stable, and i think the security problems are not ones that are... have broad political significance. they have terrible significance for people involved in them,
obviously. but they are the kind of security problems that are not somehow shaking the political structures. so, i... i take from that the sense of stability in the country. you know, iraq has been around a long time. so, i think we can take heart from the direction there. >> ifill: which direction remains unclear five months after the still-disputed parliamentary elections. no government has been formed as prime minister nouri al-maliki and chief rival ayad allawi wrangle to form governing coalitions. i spoke earlier today, before that second baghdad attack, with margaret warner, who's in the iraqi capital.k- argaret, we understand you went to the site of that bombing today. tell us what you saw. >> warner: gwen, we went to the site of the bombing late in the day. the police had cordoned off the whole area and weren't letting media in.
this area is really kind of across and catty corner up the tigris river. we were able to approach it late. we got through by talking to the army officers there. what we saw was a very huge square which had been an open air market, but this is where we spoke to one of the police officers who had been at a check point nearby and had witnessed it. he said that people overnight had been waiting, camping there, young men, so that they could be first in line at this army recruiting station in the morning. all we could see was a gigantic pool of human blood still. i'd say seven feet wide. and a huge pile of shoes. >> ifill: margaret, do you have any sense of who was responsible for this or why this location? >> warner: you would have to call this still the heart of baghdad. there are a lot of government ministries and government buildings in this area. whoever did it clearly is trying to send a signal that as the government prepares to really take over even greater
security responsibilities from the americans that they aren't up to the task. so whether it's al qaeda, which is what the iraqi military is saying officially, or whether it's what quite a few people in the crowd they suspect the hand of either the iranians, iranian intelligence, the syrians. no one is quite sure, but there is just no doubt that various insurgencies and terrorist groups out there still have the power to strike if not in big coordinated attacks as they used to, in still fairly spectacular ones with high symbolic value. >> ifill: with this violence, this uptick in violence we're seeing, how insecure are people feeling about this upcoming pullout or handover or whatever you want to call it? >> warner: they sound insecure when they speak to me about it, gwen. i've only been here 36 hours. but on the one hand many are welcoming the fact that americans are drawing down further.
they're well aware that they haven't seen american troops, for example, patrolling in baghdad streets for over a year now. americans pulled out from the cities a year ago, but everybody knew that the cavalry was very nearby and it was very big. 150,000-160,000 u.s. troops at its peak. by september 1 that's down to 50,000 which is about 20,000 fighting forces. the iraqi people know this. what i have heard from a lot of people is pride in their armed forces but also trepidation, that they may not be able to handle it, and that various groups are going to try to take advantage of this transition to step up their level of attack. >> ifill: is there a pretty clear understanding or suspicion that there's a connection between this violence and this upcoming change in ownership of this war? >> warner: yes, gwen. also people here are making connection tweb the violence and the lack of a new government here.
as you know, elections were held five months ago. the two top vote-getting parties and other parties have still not been able to come up with a coalition or power- sharing arrangement. what i've heard from people, shop people, shoppers , mothers, young mothers that we have spoken to today, and in fact a couple of young army officers whom i spoke to off camera, is that this lack of government is also another invitation to those who would try to exploit the still considerable weakness of this iraqi state that is trying to stand itself up. i would say both the political transition that has not yet been completed as well as the military one is making people nervous here. >> ifill: where does the political transition stand now, margaret? are we still in a stand-off position there? >> warner: yes. in fact, gwen, yesterday the stand-off became more of one. the current prime minister or acting
one nouri al-maliki. his party received 89 seats, yet allawi, head of another fairly secular-minded coalition received 91 seats. they've been trying to do a de yesterday the two main factions basically broke off talks. allawi took umbrage at something maliki had said in an interview when he dismissed allawi's coalition as nothing but a, quote, sunni bloc. allawi just said, "i've had it r now." he's walked. now i do know that negotiations still continue fast and furious. i don't think that has stopped today. i have no indication it has. so there's a lot going on behind the scenes. but certainly they are not close to a resolution from what i understand. >> ifill: margaret warner on the ground for us in baghdad, thank you. >> warner: thanks, gwen.
>> ifill: president obama packed his portable bully pulpit this week for a coast-to-coast campaign swing designed to build support for democratic candidates, and for his own economic policies. judy woodruff has the story. >> woodruff: with this fall's elections drawing closer, president obama has hit the road to raise excitement-- and right now, more important, money-- for the democratic party. overall, democrats have out- raised the g.o.p., but they need to keep it up, since polls consistently give republicans the advantage. so the president is returning to the role he played in 2008, when many voters viewed him as almost a rock star. just this week, his schedule is jam-packed with stops in five states, where he's also talking up his economic agenda: wisconsin and california yesterday, two appearances in washington state today, before traveling to ohio and florida.
the string of events started in te july with five money- raising events in six days-- two each in washington and new york city, and one in atlanta. the pace continued as mr. obama moved on to chicago, and austin and dallas, in early august. today, he raised money in seattle for senator patty murray, helping bring his two- day haul to $2.7 million. pepping up democrats and pushing his own and the party's record is a role mr. obama seems to have slipped back into with ease, even as he faces a much tougher political terrain. >> you did not send me to the oval office to just do what was popular; you sent me to do what was right. ( applause ) that's why you sent me to washington. >> woodruff: and yesterday at a fundraiser in wisconsin for
gubernatorial candidate tom barrett, the president called out republicans who he said want to return to failed policies. >> if you want to make your car go forward, what do you do? you put it in "d". ( laughter ) if you want it going backwards, you put it in "r". that's not an accident. >> woodruff: immediately afterwards, mr. obama flew to los angeles for an event for democratic congressional candidates across the country. this followed some grumbling from democrats that the president wasn't doing enough to help them hold onto their majority. making matters worse, last month, white house press secretary robert gibbs acknowledged democrats could lose the house. >> i think there's no doubt there are enough seats in play that could cause republicans to gain control. there's no doubt about that. this will depend on strong campaigns by democrats. >> woodruff: all this is taking
place as the president's own job approval poll ratings have been sagging, to under 50 percent, amid public concerns about the economy, government spending, and two wars abroad. but presidential historian richard norton smith says, regardless of a commander-in- chief's popularity during off- year elections, being a fundraiser goes with the territory. >> it's part of the job. even presidents who are riding low in the polls are often very successful as partisan fundraisers. george w. bush, for example, demonstrated that throughout his presidency; jimmy carter and the latter part of his presidency likewise. so there's no real correlation between where you may stand in the gallup poll and your ability to raise money for your party's candidates. you are the fundraiser-in-chief, there's no doubt about that. >> woodruff: still, some democrats have avoided being seen with the president, particularly those running in
red states. in georgia, candidate for governor roy barnes did not attend a party fundraiser with mr. obama earlier this month. and in texas, bill white, who is running for governor, did not show up at either of the two events in his state. those democrats keeping the presidenat an arm's leng werehe subject of a humorous web video put out by the republican national committee yesterday. >> we're just about to depart d.c. and go on my national fundraising tour to your home states. that's right, i'm coming to your home towns! ( screams ) >> woodruff: some republican candidates have also run ads trying to put their democratic opponents on the defensive. in missouri, governor candidate roy blunt paid for a tv spot after president obama flew in to campaign for democrat robin carnahan, trying to use mr. obama's own words against carnahan.
>> july 8, 2010. barack obama's raising money for robin carnahan. why? >> i need another vote. it'd be helpful. >> he knows robin carnahan will rubber stamp the pelosi-reid- obama liberal agenda: >> woodruff: which highlights the question some vulnerable democratic candidates are surely asking themselves-- can a push from the president do more harm than good? former republican congressman tom davis says it depends on where they are. >> the president maintains a strong popularity among african americans. to get a democratic base model that helps elect democrats, he can be very helpful. on the other hand, among independent voters, particularly in the south and the midwest, and the west, at this point, he's probably a liability. and candidates want to run showing their independence, not the fact that they will be obama robots. >> woodruff: richard norton smith agrees it's a tricky question for democrats facing
serious challenges. >> its a question of the level of visibility. how visibly do you want to be associated with the president? you certainly want to be associated with the president's capacity to raise money for your campaign. can you have that without having whatever perceived down side there may be in being associated with the president in a program that may, in some districts, be unpopular? fundraising is one activity, campaigning is another activity. >> woodruff: the answers will grow even more tricky in the fall, when the president makes more appearances aimed at exciting and turning out the vote. that's when democratic candidates will likely be studying public opinion polls-- their own and the president's-- even more closely than they are now.
>> lehrer: next, the debate over the government's role in the housing market and what it could mean for fannie mae and freddie mac. ever since the housing bubble burst in 2008, the fates of mortgage giants fannie mae and freddie mac, and their problems, have loomed large. today, the obama administration called in banking executives and others for advice on the issue. treasury secretary timothy geithner moderated. >> fixing this system is one of the most consequential and complicated economic policy problems we face as a nation. these were avoidable failures, and it is our responsibility to make sure that we create a system that is not vulnerable to thessame failures happening again. >> lehrer: fannie and freddie are government-sponsored enterprises-- g.s.e.s-- that operated as private companies. they packaged mortgages into securities, with a guarantee
against default. the goal was to help more americans afford homes. the companies made huge profits, but when sub-prime mortgages went bust, they took huge losses, and investors looked to the government to stand behind the guarantees. in september of 2008, then- treasury secretary henry paulson announced a federal takeover. >> fannie mae and freddie mac are critical to turning the corner on housing. >> lehrer: to date, the rescue has cost the treasury nearly $150 billion. republicans have charged fannie and freddie promoted irresponsible lending, and played a key role in bringing on the recession. secretary geithner said today the companies were not the only cause of the crisis, but he pledged "fundamental change." congress did not directly address fannie and freddie in the new financial regulation law. instead, it ordered the
administration to come up with a reform plan by january, and geithner called today for help across party lines. >> the failures that produced this crisis, that produced the system we have today, were bipartisan, and the solution must be as well. this is a test for washington. >> lehrer: but the shape of any change remains a large question. housing secretary shaun donovan. >> we need to ask ourselves what role the government should be playing in that market. to be clear, the government's footprint in the housing market needs to be smaller than it is today. >> lehrer: but just how small or big that footprint should be sparked debate today. william gross runs the world's largest bond fund, pimco. >> we need the government balance sheet. and to suggest that the private market could come back in and take the place and do the same thing that they've done for the past 20 or 30 years is simply impractical. it won't work. >> lehrer: alex pollock is with the conservative think tank,
american enterprise institute >> we need a private secondary market for the bulk of mortgage loans. we should have no g.s.e.s-- frannie and freddie should no longer be g.s.e.s. you can either, in my view, be a private company or a government agency-- one or the other, but not both. >> lehrer: in the meantime, fannie and freddie continue doing business. they bought or guaranteed nearly three-quarters of all u.s. home loans last year. we get two views now: william poole was president of the federal reserve bank of st. louis from 1998 to 2008. he's a scholar in residence at the university of delaware, and a senior fellow at the cato institute, a libertarian think tank. john taylor is the president and c.e.o. of the national community reinvestment coalition, focusing on housing in traditionally under-served communities.
he has served on housing advisory boards for fannie and freddie. mr. poole, now, you believe that it's time to phase out fannie may and freddie mac, correct? why? >> absolutely. there seems to be general agreement-- and i was pleased that tim geithner emphasized this point-- they should not be reconstituted as private entities with government support in the background. so the question is, are they going to be perhaps merged into a single government agency to continue doing what they are now doing? my view is that they ought to be phased out altogether. i think bill gross is absolutely wrong in his diagnosis. i note that many other countries have western european do not have intermediaries like this. their markets work just fine. so we can do without them. >> lehrer: we can do without them, mr. taylor?
>> i love it how folks refer to canada when they want to. they also have socialized medicine up there. they also refer to the u.k. in the same vein that they have a good system. look, no, it's a long stretch to go from secretary geithner's comments that we can't reconstitute them the same to totally eliminating them. this is the bad news for, you know, tens, 50 millions of americans who now.... >> lehrer: why would it be bad news? >> they owe their mortgage to the fact that fannie and freddie. 95% of their corporate career actually did a pretty good job in creating home ownership in the middle class. it was and mr. poole in his editorial in the "new york times" he even says this. it was the free market that led us into this abyss of sub prime lending. fannie mae and freddie mac followed them. as he puts it, they joined the parade, i think is what he says. but they didn't get in front of the parade to try to stop them. that's a little unfair. let's eliminate them.
my question is do we want to eliminate the free market or wall street or the investment banks because they led the parade. >> lehrer: let's ask mr. poole that. mr. poole? >> there's no question that the private market made terrible mistakes, bears a lot of responsibility for the financial crisis. but i repeat that there are many other examples of markets that were just fine without a government intermediary. a good example would be the automobile market. the banks secure ties auto loans. they are sold into that market. the auto loans are, of course, the obligations of households. it works just fine without a government intermediary. i think you would be surprised at how fast the market would fill the gap as fannie and freddie are phased out. >> lehrer: what would be the harm, mr. poole, from your perspective in reconstituting fannie and freddie in some
continued hybrid form? >> the harm would be that it would be a method away... a method or a way of slipping further housing subsidies into the operation of the mortgage market. we might put some taxes or extra fees, for example, on the securization and that would be used to finance other housing programs. if we're going to have subsidies, they ought to be openly discussed, they ought to be transparent, and they should be enacted by the congress not as back-door fees. fannie and freddie, to my way of viewing it, had a very inglorious history here of campaign contributions and many other practices that were really on the edge of being unsavorry. >> lehrer: back to you on that, mr. taylor, on the reverse question.
what would be the harm of doing.... >> the market. >> lehrer: you say the market would collapse. >> look what happened when what essentially fannie in fact took a back seat in mortgage lending. from 2001 to 2003 they lost a trillion dollars of market share. a trillion dollars. they lost it to the free market. the folks that bill have suggested should be the only lender. what did they do? what did that free market do? those are the ones who financed no documentation, low documentation, piggy-back loans, made loans to people who had no ability to pay. it was all about fee taking. it's what got us into this mess. the thing is not to throw the baby out with the bath water. bring them back but have the oversight. make sure they're adequately capitalized. make sure they can't do some of the things that bill is suggesting. i agree, prohibit them from making political contributions. i'd like them to do with with a lot of institutions but there are things we can do to keep the good parts of this market that created a lot of
home ownership for a huge segment of our population here in this country without allowing them to follow any bad actors down any path, whether it's high costs or sub prime or predatory lending or anything like that. >> lehrer: you mentioned mr. poole's piece in the "new york times". he feels that-- and you can say it in your own words, mr. poole, but i'll put it to mr. taylor-- that what fannie and freddie essentially did was use the government to back up the risk, the government side, and the private side made the money. how do you keep that from happening if you reconstitute or continue fannie mae and freddie mac? >> you know, of course, the fact that the charter for fannie and freddie are only guaranteed a billion dollars worth of losses but there was a implicit guarantee that people referred to that the government would back them. as it turned out it will back private financial institutions as well. that implicit guarantee, just because it doesn't have a
government stamp on the agency doesn't mean that the government isn't going to stand behind you so we don't have a more catastrophic event in our economy. as far as whether or not... i'm sorry. >> lehrer: the way it is now, fannie mae and freddie mac, the government bails them out. but when they make money, the private side makes money, gets rich. >> exactly. that was my point about they need to in the same way that mortgage insurance companies or other kinds of companies, they need to keep a reserve, keep adequately capitalized so they can deal with any losses that they suffer in the future. all businesses should and do indeed do this. there's no reason that we can't create reasonable standards for them to hedge against losses and particularly if you're keeping them out of really highly riskey unsavorry kind of lending practices and you have adequate capitalization, you can actually have the kind of system we had seven, eight
years ago before they really got into the sub prime market in a heavy way. >> lehrer: what about that mr. poole? can we go back to that? >> we should not mix up general issues of financial reform with where we take fannie and freddie. the issue is whether fannie and freddie should be reconstituted as truly government agencies. i don't think anybody real he's wants them to be private agencies. the old system where the government bears the risk and the private parties get the gains, everyone agrees that is a rotten system. should fannie and freddie remain as government agencies, probably merged as a single agency? my view is that they're not necessary. one of the things we don't seem to talk enough about is that the government is in a terrible fiscal situation. here is an opportunity for the government to shed some operations at very little cost to the mortgage market.
indeed i think the mortgage market would benefit. one of the good ways of looking at this is that the jumbo market which has mortgages above the size permitted for purchase by fannie and freddie, traditionally they were about 25 basis points above the conforming mortgage rates. that's about where they are today. so already you see that the private market is really quite well established all over again. >> lehrer: all right. we have to leave it there on this note of disagreement. we'll see what happens. thank you both. >> thank you. >> ifill: next, moving from the troubles of the mortgage giants to the troubles of homeowners in florida who are walking away from their mortgages. newshour economics correspondent paul solman investigated that this spring as part of his ongoing reporting on "making sense of financial news." we have this encore look. >> reporter: meet 28-year-old josh bartlett-- west virginia native, now a restaurant manager
in fort myers, florida. he lives in a condo he bought in 2005 for $210,000 with a mortgage of $190,000. and what's it worth today? >> $45,000. i can go across the street, pay cash, and never have to worry ever again about a mortgage payment. >> reporter: across the street, around the corner. with a 60% vacancy rate, bartlett could buy at least four units in this development for what his place cost. but as for never worrying about a mortgage payment again, well, it's not as if he's sweating over his current obligations. >> in december of 2007, i made my last payment. every previous payment was on time, and i told them that if they didn't adjust any kind of rates, any kind of principal, that they would not see another dollar from me. >> reporter: and that that was the last time you made a payment, december 2007? >> yes, sir. 2008 was a free year, 2009 was a
free year, and so far, four months into 2010. >> reporter: so, you could afford the payments that you're not making. >> yes, i could afford that. but when it's only worth $45,000, i would much rather flush my money down the toilet. >> reporter: as far as bartlett is concerned, he and the bank are even. >> i made a $20,000 down payment. i paid them two years of interest only, which adds up to about, you know, roughly $30,000, so, you know, i'm... i'm willing to walk. >> reporter: bartlett is a part of a growing breed in the post- boom bust-- strategic defaulters, those who can afford to make their mortgage payments but refuse. with their home values way below what they owe, they figure, why throw good money after bad? >> at some point in time, you have to cut your losses. >> reporter: golf pro jason welsh figures he can rent for less, and save money for his kids' college education. >> it's the smart business decision.
it's not about whether i can afford the place or not; it's more about taking care of my family. >> reporter: but what about the seven years of bad credit scores that punish all defaulters? >> i just feel that i can rebuild my credit score faster than i'm going to get $100,000 equity back in my house. >> reporter: and with lenders overwhelmed by so many foreclosures like jason welsh's, and legal complexities galore, they're not going after his other assets, even though, in florida, they could. according to economist luigi zingales, strategic defaults now account for a third of all foreclosures in the u.s., a significant increase from just a year ago. >> people who know other people who walk away are more willing to walk away, so this points in the direction of a contagion. >> reporter: and that, says zingales, could make a bad situation even worse. >> if most of the people that are underwater walk away, then house prices will drop even more, and then that will induce
more people to walk away. so we can have sort of a vicious circle in a lot of real estate markets, local real estate markets, that could be really dangerous. >> reporter: in florida, where nearly half the mortgages are underwater, walking away is becoming, if not yet commonplace, at least nothing to be ashamed of. >> you watch the news, you talk to people in this area, it's... it's not so bad now. >> reporter: besides, says bartlett, businesses do it all the time. in december, morgan stanley stopped making payments on five san francisco office buildings worth half what they cost in 2007. in january, developer tishman speyer gave two manhattan apartment complexes on which it had borrowed $4.4 billion back to its creditors, including the california teachers pension fund. current market value-- $1.8 billion. and in february, the mortgage bankers association sold its
washington headquarters, on which it owed $75 million, for $41 million. continued ownership, said the m.b.a., would be economically imprudent. >> yes, i'm defaulting. yes, i'm walking away. but i'm not going to keep running a business that is losing money as the days go on. >> reporter: so a lot of folks aren't bothered by walking away any more than they're embarrassed by having bought during the boom-- the latest one or, for that matter, the one that created this corner of florida in the late '50s, when the rosen brothers, a couple of salesmen from baltimore, thought to develop cape coral. historian gary mormino. >> they bulldozed everything over, they brought in an aggressive commissioned sales force, they brought tourists to cape coral by airplane. if you forgot your checkbook to make your down payment, they had blank checks from every bank in america. and cape coral was one of the great success stories.
>> cape coral, with more miles of waterways than venice, italy, has become a legendary way of life on florida's gulf coast. >> i took one look and said, "that's it." >> reporter: half a century later, local realtor kevin jarrett said pretty much the same thing. >> stood right here, put my hands on the counter, looked out onto the water said," this is it, this is where i want to be. this is the dream." >> reporter: in 2006, jarrett bought this home for nearly three-quarters of a million dollars. but his dream of living on the water soon had him drowning in a nightmarish sea of debt. >> soon after i bought the home, everything started crashing and i didn't have the cash to pay it off like i expected to. so i started paying the minimum, and then the below-minimum, which just kept putting... adding on to the back end of the house. >> reporter: while his mortgage amount rose, the value of the house plunged; ultimately, by more than 50%. >> i tried to keep everything going as long as i could,
waiting for something to change, because everybody said that this market crash was going to last six months. well, obviously not. >> reporter: jarrett didn't walk away so much as stumble away, broke. the bank moved to foreclose. >> during that process, i also lost my family. my... i went through a divorce. my wife and my daughter now live up north. i mean, i have literally lost everything. but right now, i'm just trying to do what's right, you know. and i'm in a bad spot, in a bad situation, but it has nothing to do with a business decision where, you know, i'm walking away because my house is upside down. >> reporter: jarrett's foreclosure, in other words, was no strategic default. but had he had the option, he says, he wouldn't have gone that route. >> if you buy a car, it loses value as soon as you drive it off a lot, but you still keep making the payments for that vehicle. i don't see the difference with the homes. what right do you have to say, "well, i'm going to not pay because now you're taking money from other people because i... i
want to take care of my family." well, so, somewhere along the line, ethics have to come into play, you know. and i just don't think it's right to do that. >> reporter: neither-- you probably won't be surprised to learn-- does banker bill valenti. >> when the value of the house was going up, you know, no one ever came to the bank and said to me, "bill, i've just sold my home, made $100,000. here's $10,000 for the bank. thanks for helping me," you know? but yet, when the value of the home is going down, notwithstanding the fact that the borrower can repay the loan, they expect the bank to take the loss, or the person that bought that mortgage in the secondary market. in my opinion, it's just simply not fair. >> reporter: but most mortgages aren't owned by banks anymore, right? they're owned by investors who own shares of pools of mortgages, and those investors are all over the world. >> and you and i may be investors in those pools by virtue of the fact that we've invested in a mutual fund or... or some other investment
vehicle. so, some other human being, not an institution, is going to lose money as a result of their decision simply not to honor an obligation. and where does it end? how can a bank make a loan in the future if it runs the risk of knowing that the value of that property, if it goes down, the borrower has the right to leave it? >> reporter: so what are you doing here at this point? >> well, some people would call it squatting. but they could still have me, you know, to make payments, to refinance, to lower my principal. there's a million things that they could do but are not willing to. >> reporter: but you have made out like a bandit. >> i've made out like a bandit, yes. but i'm willing to work with them. i'm willing to say, hey, look, we all made a mistake, we all got a little crazy in 2007." >> reporter: three years later, it's a mistake bartlett, like so many other americans these days, is no longer willing to pay for.
>> lehrer: finally tonight, a life surrounded by music. jeffrey brown talks with singer/songwriter rosanne cash. ♪ i told you, baby, from time to time ♪ ♪ but you just wouldn't listen ♪ >> brown: last year rosanne cash released an album titled "the list," songs from a list of essential country music given her when she was a teenager by her famous father. the list is a celebration and a continuation of a family legacy. and what a legacy! roseanne was the oldest child of johnny cash and his first wife vivien and the stepdaughter of june carter cash, a member of the legendary carter family. she learned from them all beginning in the 1970s, carved out her own career as a songwriter and performer with chart-topping success.
now 55, rosanne cash tells her story in a new memoir titled "composed." when we talked recently i asked her about one major theme of the book: being part of a larger family of musical drama. >> maybe a bit too much drama. yeah. but more than drama, part of this legacy again. and, you know, my father cast an enormous shadow musically. he was one of the five greatest artists of the 20th century in my humble opinion. and that is huge, you know, that's a huge... i don't want to say burden. but it's significant. i think any young person who is going into the same field as their... whose parent has been very successful it's complicated. it was complicated for me. >> brown: and you write one of the sections that's most moving here is right out of high school, right, you go on the road with him. he learn about the life of a musician. what did you learn?
>> i really saw how bone- crushing the exhauion could be. it was a look deeply behind the veil. people think it's very glamorous. it's not at all glamorous. it's exhausting. i mean two hours on stage, you know when he was his best self which was beautiful. kind of miraculous. >> brown: but the rest of the time? >> yeah, it's tough. it was a tough life. i learned a lot watching him about a connection with an audience . i learned how problems can dissolve in the spotlight. oddly. how you can work out your relationships in the spotlight. my dad was very good at all of that. >> brown: of course then the other main theme then is how you work hard and find a way to establish your own presence, your own voice. >> yeah. i wanted to very much. i wanted to be a songwriter.
i didn't so much want to be a performer. i more grew into that just from being a songwriter. >> brown: but you make that real clear that you really did not want to go out there and sing in front of people. >> no. >> brown: perhaps because of that life you were describing? >> partly because of the life and also my mother had a lot of anxiety about a musician's life. you know, you got addicted to drugs and your marriage broke up and you were away from home all the time. who would want that? right? so i had a little bit of that imprint in me. it was a bit scary. i was very naturally reticent. i wanted to be the writer in the room setting depth charges and feeling out the world with my language. i had a very romantic idea about that but i grew into being a performer. >> brown: it clearly was a continuing process. >> yeah. >> brown: there's a place where you write and this comes after you've achived great success which is why it interested me so much. you said the way i approached song writing.
i changed how i sang. i changed my work ethic. what happened? why did you want to... you had already achieved a great deal. >> not to be too mystical about it but i had a dream that kind of showed me that i had been somewhat of a dill tent just riding on this little wave of success and not going into the trenches of myself and doing the work. it scared me. i wanted it. i wanted that kind of depth as an artist. and i changed everything from that day. >> brown: that meant writing in a different way, writing about different things? >> it meant exploring it from all angles. i gave up language for a while. i started painting. then i only listened to miles daifs and other instrumental music to see how it felt to be without words. then i put them back in. i just went deeper into a process of working with language. >> brown: when one is living so much in public and, as your father did with the fame and
the song s, but then there's also the down side, the darker side. the addiction that people were aware of and followed. then there was the movie that came out more recently which you did not like very much. >> well, would you like a movie about your childhood? not many people would. >> brown: what did we not know of him? who was the johnny cash or the family that you grew up in that we did not know? >> that's who i wrote about in my book. this beautiful soul who was propelled by rhythm and language, who had deep... a deep love for rhythm and language and who loved children. and respected children as much as he did any adult. teenagers too. he told me once that he could learn more from a 19-year-old than he could from anyone his age. he wouldn't give advice unless you asked for it but he was the most loving parent. >> brown: you know, one last thing.
i mean very noticeable here. there's a lot of pain and that kind of messy stuff of life. some of which we've talked about. but one thing you didn't do here is give a lot of gossip. or dirt. orbiterness. >> i'm not bitter. you know, at some point in my life i saw that was a choice. i could become bitter if i wanted to. or i could not. i started looking to the future. you know, how am i going to look... i actually thought how will i look if i become bitter? i don't like it. i'm not going to do it. it's work. i made a conscious decision not to dish, not to gossip about people, not to point fingers, not to blame and not to be bitter. >> brown: because? >> because it was just... i wanted to have more grace than that. more integrity. i wanted to be able to look myself in the mirror and say i wrote something poetic that didn't hurt anyone. >> brown: the book is "composed."
rosanne cash, thanks for talking totos. you brought your guitar. you're going to play something for us from "the list." >> this is "girl from the north country." ♪ if you're traveling in the north country ♪ ♪ the winds ararheavy on the borderline ♪ ♪ remember me ♪ ♪ the one who lives there ♪ she once was a true love of mine ♪ >> lehrer: again, the major developments of the day: former illinois governor rod
blagojevich was convicted of a single count of lying to federal agents. and a suicide bomber in baghdad killed at least 57 iraqi army recruits and wounded more than 120 others. the newshour is always online. hari sreenivasan, in our newsroom, previews what's there. hari. >> sreenivasan: you can watch rosanne cash perform two songs, margaret is filing regular blog posts from iraq. tonight, read more about security in baghdad and the aftermath of today's bombing, and find photos from her reporting trip. >> ifill: and that's the newshour for tonight. i'm gwen ifill... >> lehrer: and i'm jim lehrer... we'll see you on-line... and again here tomorrow evening. thank you and good night.
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